Are Stationary Hyperinflation Paths Learnable?
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Date
2003-03-17
Authors
Adam, Klaus
Evans, George W., 1949-
Honkapohja, Seppo, 1951-
Journal Title
Journal ISSN
Volume Title
Publisher
University of Oregon, Dept of Economics
Abstract
Earlier studies of the seigniorage inflation model have found that the high-inflation steady state is not stable under adaptive learning. We reconsider this issue and analyze the full set of solutions for the linearized model. Our main focus is on stationary hyperinflationary paths near the high-inflation steady state. The hyperinflationary paths are stable under learning if agents can utilize contemporaneous data. However, in an economy populated by a mixture of agents, some of whom only have access to lagged data, stable inflationary paths emerge only if the proportion of agents with access to contemporaneous data is sufficiently high.
Description
Keywords
Mathematical and quantitative methods, Mathematical methods and programming, Existence and stability conditions of equilibrium, Microeconomics, Expectations, Macroeconomics and monetary economics, Information and uncertainty, Speculations, Search, learning, and information, Prices, business fluctuations, and cycles, Price level, Inflation (Finance), Deflation (Finance)